Buying Bitcoin Online with a Credit Card

[Bruce Wagner]

We've all read about the terrible consequences of accepting credit cards online for immediate currency exchange.   i.e. BuyBitcoin.com

Here's my idea:

Is there any way you could launch such a site again with these new rules:

1.  Users may purchase via credit card.

2.   Users receive MtGox USD (not actually bitcoin).  They can then easily buy their own bitcoin at their own convenience, at their own price, at Mt Gox.

3.   The funds are HELD -- and CANNOT BE WITHDRAWN -- for 90 days, by YOU.  (In other words, you simply don't give it to them for 90 days. And they are told this up front beforehand.)  This way, funds would have cleared any window for potential fraud or chargeback.

I believe that there are LOTS of people in the world who are wanting to "get into" bitcoin and "play with it".... and even use it for Tip Jar money to tip content creators, for example... who ARE WILLING to put up with a 90 day delay in access to those funds, just for the Simple CONVENIENCE FACTOR of using an ordinary credit card.

In fact, I've asked my friends, and they've all agreed unanimously.  They WOULD be willing to WAIT 90 days for access to the funds -- in exchange for the pure simple convenience of using an ordinary credit card.

People Probably wouldn't do this for large amounts.  But many many people would do this for small amounts.

Thoughts?

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[Gavin Andresen]

Probably against all of the credit card companies' terms of service; they don't like you taking money before "shipping the product."

[jgarzik]

They also don't like you giving out a monetary type exchange because that is what they consider a cash advance and they charge steep fees for it. You do that without going through their cash advance and they can shut you down quickly as well.

Someone needs to figure out how to hook into the cash advance system.

In theory, if one can withdraw cash or gold from an ATM, using credit card, one should be able to withdraw bitcoins.

[Bruce Wagner]

Someone needs to figure out how to hook into the cash advance system.
In theory, if one can withdraw cash or gold from an ATM, using credit card, one should be able to withdraw bitcoins.

Wow....    I can see it now.     .....a Bitcoin ATM.

That's an amazing idea. 

I wonder if any of the gazillion ATM companies....  who are ALREADY in this business....   giving out cash advances on credit cards, etc....  selling postage stamps, etc....   could be talked into selling "virtual currency" via ATM.

It seems like it would be 100% a software project for them.   And a very very simple one, at that.

[caveden]

I don't understand it.

Okay, so US credit cards and bank transfers allow chargebacks. Got that.
But why it seems that we here are the first ones to have issues with that? It can't be. There must be some sort of insurance that people selling through CC and bank transfers could hire in order to protect themselves from chargebacks.

A site selling bitcoins for CC would only need to dilute the cost of such insurance in transaction fees or whatever source of income they come up with.

Why can't it happen that way?

[caveden]

Another thing such sites could do is require some identification from those willing to open an account. Since CC and bank transfers aren't anonymous anyway, that wouldn't be more of a privacy loss than the means of payment itself already is.

So, for example, the site could require those opening an account to provide some photos of their ID cards or passeports. After receiving the first bank transfer/CC payment it would match the ID with the source of payment and then, for security/privacy reasons, it could delete such photos. This would involve manual work, but if the site grows enough, then automatic recognition of some types of ID pictures could be implemented.

This wouldn't stop all sort of scams but could strongly limit them.

[Anonymous]

Another thing such sites could do is require some identification from those willing to open an account. Since CC and bank transfers aren't anonymous anyway, that wouldn't be more of a privacy loss than the means of payment itself already is.

So, for example, the site could require those opening an account to provide some photos of their ID cards or passeports. After receiving the first bank transfer/CC payment it would match the ID with the source of payment and then, for security/privacy reasons, it could delete such photos. This would involve manual work, but if the site grows enough, then automatic recognition of some types of ID pictures could be implemented.

This wouldn't stop all sort of scams but could strongly limit them.

This is exactly what I have needed to do with a lot of the sites. Usually a primary ID such as drivers license or birth certificate and a couple of secondary ID such as a utility bill with your name and address on it and a bank statement or similar id. The utility bill name should match the name on the credit card as well as the name on the drivers license ,which should match the address on the utility bill.

http://www.greenid.com.au/  see this site for an example of an online verification system.

[Drifter]

.
But why it seems that we here are the first ones to have issues with that? It can't be. There must be some sort of insurance that people selling through CC and bank transfers could hire in order to

Most e-currencies have the same problems. That's why you usually can't buy things like Liberty Reserve with a credit card. Paypal is tied to an identification so they don't have as big of a problem with any fraudulent buyer charges. If you want to use credit cards, you need a system which ties to your identity, and bitcoin is not that.

[hippich]

Another thing such sites could do is require some identification from those willing to open an account. Since CC and bank transfers aren't anonymous anyway, that wouldn't be more of a privacy loss than the means of payment itself already is.

So, for example, the site could require those opening an account to provide some photos of their ID cards or passeports. After receiving the first bank transfer/CC payment it would match the ID with the source of payment and then, for security/privacy reasons, it could delete such photos. This would involve manual work, but if the site grows enough, then automatic recognition of some types of ID pictures could be implemented.

This wouldn't stop all sort of scams but could strongly limit them.

This is exactly what I have needed to do with a lot of the sites. Usually a primary ID such as drivers license or birth certificate and a couple of secondary ID such as a utility bill with your name and address on it and a bank statement or similar id. The utility bill name should match the name on the credit card as well as the name on the drivers license ,which should match the address on the utility bill.

http://www.greenid.com.au/  see this site for an example of an online verification system.

First of all - you can use any name on credit card and it will be accepted by merchant. Merchant checks only number/expiration date/cvv. If they use address verification (which available only for US/Canada/UK addresses), they use only NUMBERS from address and ZIP code. Name, street name, city, state can be any!

Next - there is forums where you can order professionally made copies of credit cards, passports, utility bills, etc..

Even with callback verification - there is services where people do required call checks...

I.e. - all this identification bullshit doesn't really work. So credit cards is non goer. Only real cash, internation wires (probably) and things like this.

But the best way to do it - accept bitcoins for service and products. We do not need really cash exchanges. But ofcourse, if it could be done, it would let people get in easier.

[Bruce Wagner]

Ok. You guys have convinced me.  Any acceptance of Credit Cards / PayPal / Moneybookers is not doable.

I agree.   Of course, selling your services and/or products is the easiest way to earn bitcoin.   However, if no one has any bitcoin to begin with... the pump needs primed.

None of my clients / customers have even heard of bitcoin, much less have bitcoin to spend. 

So, I'm coming to the conclusion that we really really need local face-to-face "Bitcoin Dealers". 

These could be individuals -- like YOU who are reading this -- who have volunteered to act as a "Bitcoin Dealer" in Your local area.   It could also, hopefully, include retail shops, stores, coffee shops, coin dealers, convenience stores, ATMs, local bank branches, ... just about ANY entity that could be convinced to sell bitcoin for cash in face-to-face transactions.    Heck, the local boyscout troop or church group could even sell them as a fundraiser!

Toward this goal, I registered bitcoinshop.com today.   

I'm thinking that I will try to make it a very clean simple "first entry portal" site designed for total newbies.   It should explain what bitcoin is is very simple terms.  Explain the easiest ways to buy it.  The easiest ways to spend it.   The easiest ways to accept it in their own business.   The easiest ways to exchange it back into cash.   And even the easiest ways to set up their own bitcoin-for-cash business.

In its most basic form, I envision (1) one brief page -- with a very simple explanation of what bitcoin is all about -- and with loads of links to all the best bitcoin sites and resources out there.  And, (2) a separate page that is basically a spreadsheet, acting as a master Directory of Bitcoin-for-Cash Dealers -- Sorted by Country / City.  And, (3) a second tab on that spreadsheet listing shops and businesses that accept Bitcoin as payment -- also sorted by Country / City.

Thoughts?

I'll try to set up an alpha version 0.01 of the site by later tonight. 

[caveden]

First of all - you can use any name on credit card and it will be accepted by merchant. Merchant checks only number/expiration date/cvv.

Merchant checks what merchants wants to check.

BullionVault for example, once you perform your first transfer from a bank account of yours, they won't allow you to fund your bullionvault account with any other bank account.
Why can't the same thing be done for credit cards?

Next - there is forums where you can order professionally made copies of credit cards, passports, utility bills, etc..

Those are criminal sites, I suppose, right? These criminals not only would need to have access to the private data of the credit cards, but also photos of the IDs of these CC owners... not impossible, but difficult.



And also, what about an insurance? Why can't it be done?

[Anonymous]

Ok. You guys have convinced me.  Any acceptance of Credit Cards / PayPal / Moneybookers is not doable.

I agree.   Of course, selling your services and/or products is the easiest way to earn bitcoin.   However, if no one has any bitcoin to begin with... the pump needs primed.

None of my clients / customers have even heard of bitcoin, much less have bitcoin to spend.  

So, I'm coming to the conclusion that we really really need local face-to-face "Bitcoin Dealers".  

These could be individuals -- like YOU who are reading this -- who have volunteered to act as a "Bitcoin Dealer" in Your local area.   It could also, hopefully, include retail shops, stores, coffee shops, coin dealers, convenience stores, ATMs, local bank branches, ... just about ANY entity that could be convinced to sell bitcoin for cash in face-to-face transactions.    Heck, the local boyscout troop or church group could even sell them as a fundraiser!

Toward this goal, I registered bitcoinshop.com today.    

I'm thinking that I will try to make it a very clean simple "first entry portal" site designed for total newbies.   It should explain what bitcoin is is very simple terms.  Explain the easiest ways to buy it.  The easiest ways to spend it.   The easiest ways to accept it in their own business.   The easiest ways to exchange it back into cash.   And even the easiest ways to set up their own bitcoin-for-cash business.

In its most basic form, I envision (1) one brief page -- with a very simple explanation of what bitcoin is all about -- and with loads of links to all the best bitcoin sites and resources out there.  And, (2) a separate page that is basically a spreadsheet, acting as a master Directory of Bitcoin-for-Cash Dealers -- Sorted by Country / City.  And, (3) a second tab on that spreadsheet listing shops and businesses that accept Bitcoin as payment -- also sorted by Country / City.

Thoughts?

I'll try to set up an alpha version 0.01 of the site by later tonight.  

They are building the #bitcoin-otc and trust network at this very moment. If you are going to meet face to face you need to know the person you are meeting is the one you know. pgp keys linked to usernames on the forum are one way to do this.


http://trust.bitcoin-otc.com/viewratings.php

A bitcoin craigslist would be good.

[hippich]

First of all - you can use any name on credit card and it will be accepted by merchant. Merchant checks only number/expiration date/cvv.

Merchant checks what merchants wants to check.

ok. I rephrase it. Merchants UNABLE to check anything except numbers in card holder data.

BullionVault for example, once you perform your first transfer from a bank account of yours, they won't allow you to fund your bullionvault account with any other bank account.
Why can't the same thing be done for credit cards?

Because I can register one account per credit card easily.

Next - there is forums where you can order professionally made copies of credit cards, passports, utility bills, etc..

Those are criminal sites, I suppose, right? These criminals not only would need to have access to the private data of the credit cards, but also photos of the IDs of these CC owners... not impossible, but difficult.

Yes. You did not expect doing fake utility bills and ccs on legit forums? =) And why they need to have photo?

And also, what about an insurance? Why can't it be done?

Before you get to insurance, you will need to obtain merchant account. If you decide to go paypal way (like mtgox did), you will be fine until first fraudulent charges. Once you get past this (i doubt you will do), you still need to convience some insurer to insure you. And if I'd be insurer, I'd probably look for more easy and less risky money. =)

Left option - self-insure. But you will need to put this into exchange price. And it will be too high that no one will want to buy bitcoins from you with credit card.


I believe physical dealers accepting cash is better option.

[Anonymous]

Ok I have an idea. Tell me if this sounds like a worthwhile plan.

What is the one thing every bitcoin user needs? It is an internet connection. Widespread  internet connection also helps prevent a network split which is one of the possible outcomes from parts of the network getting cut off. This means we need to build a bitcoin mesh network alongside the bitcoin financial network to help mitigate the chance this would ever happen. To do this we need to find a way for people to sell their excess bandwidth for bitcoins. It could be software on a laptop or an actual device that turns any computer  into a bitcoin isp. People can then sit at a coffee shop earning bitcoins all day and they are rewarded for becoming a bitcoin mesh node or super node. What other mesh networks allow you to earn for simply supporting the network by sharing bandwidth ? It would be a simple way to earn bitcoins for anyone who installed the bitcoin isp control panel and shared their bandwidth and its something anyone can do easily.

You could also set up your home computer to be a bitcoin isp.
http://serverfault.com/questions/15066/free-wi-fi-hotspot-management-software-for-school


Someone could park outside your house and exchange bitcoins with you for downloading something or just to do their bitcoin balance or just walk up to you at the coffee shop because your bitcoin isp software gives them directions.

If Kiba gets his makerbot business going he could even build bitcoin wifi routers with all the software built in and pre configured.

There is also the recent ratification of the wifi direct standard. http://en.wikipedia.org/wiki/Wi-Fi_Direct which allows any wifi device to talk to any other wifi device without needing a router. It would be pretty secure to directly transact p2p between devices rather than going over the public internet.

[caveden]

And why they need to have photo?

That was my suggestion. Before accepting money from a particular account, try to check whether the person on the other side is the real owner of that account. Asking for some documents like IDs and passports is one way to go.

Only allow limited funding at the beginning is also an option.

Left option - self-insure. But you will need to put this into exchange price. And it will be too high that no one will want to buy bitcoins from you with credit card.

That's weird, because it seems this whole chargeback thing is particular to US and maybe other countries, but in some places credit cards and bank transfers can't chargeback*. So, the insurance costs are already diluted in the service fees, which are high but not "too high" to stop people from using it...

*Not 100% sure. But, for example, bitcoinexchange uses bank transfers and it seems so far they haven't had problems with chargebacks.

[Bruce Wagner]

Normally, bank wire transfers do NOT allow chargbacks. 

Credit Card purchases,  PayPal, and Moneybookers are what are NOTORIOUS for chargebacks -- even more than 6 months later, according to someone here.

You pretty much cannot do a chargeback on a cash transaction either. 

This is why the best / safest way to accept payments for bitcoin is either:

 -- bank wire transfers (not anonymous at all, and totally paper trail generating) ,... or

 -- cash, either in person or via mail or fedex (about as anonymous as you can get).

Someone mentioned "trust" in reference to face-to-face cash sale of bitcoins.   No.   You forget:    Trust is not an issue if a warm body (or mailman) is handing you CASH.    You simply count the cash and say "What Bitcoin address would you like them sent to?"

I really think that a network of local dealers who sell Bitcoins for Cash, locally, is the best solution.

Like "the local pot dealer", every town has a few.  They're convenient.   They take cash.  They compete with each other.  Since every sale is a nonrefundable cash sale, trust is not an issue (regarding payments).  Heck, in Manhattan they even deliver!  (Everything delivers in Manhattan. -- EVERYTHING) 

[caveden]

If bank transfers don't allow chargebacks, what holds people (like MtGox and other exchange sites) from using it?
Ok, they are not as international as credit cards or paypal, but they may be an easier option than LibertyReserve for those who live in US, don't they? Both could be kept as means to fund an account...

[Bruce Wagner]

If bank transfers don't allow chargebacks, what holds people (like MtGox and other exchange sites) from using it?
Ok, they are not as international as credit cards or paypal, but they may be an easier option than LibertyReserve for those who live in US, don't they? Both could be kept as means to fund an account...

Bank wire transfers are just as "international" as PayPal and credit cards.  Bank wire transfers have been around long before those were even invented.

Exchange sites DO, in fact, accept bank wire transfers. See http://bitcoinexchange.com

As to why MtGox, specifically, doesn't accept bank wire transfers to buy Bitcoin, I really don't know.  But email him and ask him.  I suspect he's just too busy to take that on.  He's not Bank of America,  remember.  He's one guy.  One cool guy.   

I'll sell bitcoin for bank wire transfer,  and I'm within the US,  in New York City.  Contact me if you're interested.   bruce@brucewagner.com 646-580-0022. http://bitcoinshop.com ( But I prefer to remain anonymous,  so please don't tell anyone my name.     )

[caveden]

I know about bitcoinexchange, I've already used their service. I thought the problem was in the US, but according to what you say, there is no problem...

[Bimmerhead]

If bank transfers don't allow chargebacks, what holds people (like MtGox and other exchange sites) from using it?

Expensive and high risk. International wire transfers requires:
- sender to pay bank fee;
- merchant have to wait some days until payment is cleared (read no immediate goods delivery);
- merchant must to be sure this payment is not compromised or bank will report him to proper authorities/watch list.

Merchant that do not have stringent verification process will fall in troubles if they start accepting wires from everyone on Internet.

Are bank transfers quicker/cheaper/easier if they are within the same country?

For example, if MTGox had a trusted contact in several different countries through whom users could flow bank transfers would that be a satisfactory solution?